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Managing FX Risk Using Derivatives

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On-Site / Short Course
Ended last Sep 21, 2018
GBP  2,650.00


In our globalized world, there are few areas of business left untouched by Foreign Exchange (FX) risk. This programme will give you the confidence to manage FX risk – using a variety of derivatives products – and to identify, measure, reduce and report different kinds of FX risk.

Delegates will gain a solid understanding of the FX markets and an insight into the products and methods that can be used for managing FX market risk. Examples and case studies are used throughout the course, both to illustrate concepts and to demonstrate the motivation behind the development of financial products.

A substantial part of the programme is devoted to workshop sessions, in which delegates are able to work through practical examples and case studies, helping them to understand and retain the knowledge to be applied back at work.

All delegates receive the latest edition of Dr Zareer Dadachanji's book "FX Barrier Options: A Comprehensive Guide for Industry Quants".

Who The Course is For:
  • Beginners in FX derivatives
  • Brokers, salespeople
  • Buy-side professionals
  • Treasurers, corporate finance professionals
  • Risk managers
  • Fund and investment managers
  • Regulators
  • IT professionals
  • Accountants, auditors

Prior Knowledge:
  • Basic understanding of financial markets and basic knowledge of Microsoft Excel
  • A basic familiarity with derivatives is recommended although not essential


Day One

  • Background and global view
  • Impact of political and economic events on FX markets
The Foreign Exchange Spot Market
  • Mechanism of FX spot trades
  • Market conventions for quotation and settlement
  • Currency triangles and the chain rule
  • Bid-offer spreads, liquidity and depth
  • Electronic trading platforms
  • Managed and restricted currencies: pegged exchange rates, onshore/offshore markets
FX Forwards and Futures
  • FX market risk and the concept of hedging
  • Forward contracts: strike calculation, settlement and market quotation conventions
  • Mathematical formulae for the fair forward rate, with worked examples
  • Electronic trading platforms
  • How futures contracts work
  • Trading on an exchange, margin treatment
  • Payoff scenario analysis
Workshop: Manage FX Risk using a Forward Contract - Work through the lifecycle of an FX forward contract: calculate the fair forward rate; set the strike; specify the OTC contract; re-value your position through its life; settle the contract with the counterparty

Currency Swaps
  • Managing FX risk over extended time periods
  • The structure of a currency swap and its use as a hedging/re-structuring tool
  • Relationship with bonds and FX forwards
Introduction to Vanilla Options
  • The concept of optionality
  • Specification and mechanism of vanilla options
Workshop: Manage FX Risk using a Dual-Currency Deposit (DCD) - Explore the FX risk in a deposit under multiple currency views. Demonstrate how vanilla options can be used to manage the risk. Structure a Dual-Currency Deposit. Analyze different outcome scenarios

Day Two

Properties of Vanilla Options
  • Put-Call parity and other risk relationships
  • Properties of vanilla options: premium, P&L, time value, intrinsic value, moneyness
  • Market conventions for quotation – the 6 quotation styles and how to convert between them
  • Variation of premium with market and contract parameters
  • Electronic trading platforms
Vanilla Options Structures
  • Spreads, straddles, strangles, risk reversals, and other structures
  • The risk characteristics of different structures and their relative merits for hedging or speculation
  • Scenario analysis
Workshop: Manage FX Risk using a Risk Reversal (I) - Assess an FX risk position. Devise and explain a vanilla structure hedge. Specify the parameters of the structure. Perform scenario analysis

FX Exotic Options
  • Variations on the vanilla: cash settlement, late delivery, European digitals, quanto options
  • Barrier options
  • Volatility swaps
Further topics in FX Risk Management
  • Non-deliverable forwards
  • The Dual-Currency Deposit (DCD)
  • Currency overlay
Measuring and Reporting FX Market Risk
  • Introduction to the option “Greeks”
  • Spot ladders and other risk reports
  • Handling multiple currency pairs
Workshop: Manage FX Risk using a Risk Reversal (II) - Assess an FX risk position. Consider various barrier options as hedges. Choose the most suitable option type. Specify the terms of the contract. Calculate the size of hedge needed. Perform scenario analysis


Zareer Dadachanji

Dr Zareer Dadachanji is a quantitative analysis consultant with nearly 2 decades of corporate experience, mostly in financial quantitative modelling across a range of asset classes.

He spent 13 years working as a front-office quant at banks and hedge funds, including NatWest/RBS, Credit Suisse and Standard Chartered Bank, where until recently he held the position of Global Head of FX Quants.

Dr Dadachanji’s areas of expertise are the modelling of FX and Equity derivatives. He combines these specialist areas with a wide knowledge of general quantitative modelling, gained through years of senior-level engagement in the activities of global cross-asset quant teams.

Dr Dadachanji is the founder and director of Model Quant Solutions, an independent consultancy providing bespoke financial quantitative analysis solutions. He holds a triple first in Natural Sciences and a PhD in Computational and Theoretical Physics, both from the University of Cambridge.


No. of Days: 2
Total Hours: 16
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London Financial Studies is a specialist teaching resource that concentrates exclusively on capital markets. We offer individuals, teams and companies expert teaching that combines theoretical understanding with practical experience.Open courses are run in London, New York, Singapore or live streamed via our broadcasting platform: LFS Live. In-house courses can be run worldwide, according to client's needs.
London Financial Studies
34 Curlew Street, London, United Kingdom SE1 2ND
+44 (0) 20 7378 1050
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